A lease purchase contract is an agreement between a landlord and tenant stating that the renter has the right to purchase the house he is currently leasing within a set time. In return, the landlord claims that he won’t try to sell the property to another party for the whole period of the lease purchase agreement. An agreement in this way is a especially attractive to a possible house buyer with credit issues that he wants the time to iron out prior to going to a mortgage lender for a house loan.
List the property’s specifics. Include the address and, if applicable, the lot number. In addition, outline the number of bedrooms, bathrooms and garages. Explain if it sits on a single or double lot, or the dimensions of the acreage. Make a note of the house design, whether it’s a ranch, raised-ranch, two-story, or other special style.
Give the landlord’s and tenant’s names, as well as the landlord’s address. Make it clear in the contract who’s acting as landlord and who the renter is. Contain the landlord’s current address, telephone number and other contact information.
Document the cost of the house. Clearly state the sales price that has been agreed upon by the tenant and landlord. Be certain that this really is a number you are going to be happy with, as it cannot be changed during the term of their contract without the agreement of both parties.
Note the length of the Period. While the average lease purchase lasts between three and five decades, those are not fixed amounts. The landlord and tenant must discuss the duration of time each of these would like to see the contract conduct and think of a period that is employed for both of these. The renter has until the end of the term to secure financing for purchase from an external source.
List the consideration fee and security deposit. The contract should clearly say how much the renter is expected to cover the landlord as a”consideration fee” This money functions as a down payment on the property and provides the landlord a bonus to work together with the renter. The sum can be anything the two parties decide upon, but generally runs to between 3 and 7 percent of their sales price. Separate in the thought fee is the security deposit. As in any lease situation, the security deposit protects the landlord against any damages that may be done to his house during the terms of the lease arrangement.
State the rental credit. Decide just how much of the tenant’s monthly rental payment is going to be set aside as a credit toward the purchase of the house. This sum often ranges from 30 to 50% of the total monthly payment, but is negotiable.
Outline who’s responsible for minor maintenance and utilities. As in almost any other rental situation, the landlord is responsible for making sure that major repairs are done and that the house is habitable. However, minor problems like changing the furnace filter, fixing loose hardware and mowing the yard are all negotiable points.
Clearly describe what happens when the tenant opts not to purchase the property, and what happens when he does decide to purchase. Most purchase contracts say that in the event the renter is unable or unwilling to purchase the house, any cash that he has compensated as an account fee or rental credit is nonrefundable. On the other hand, if he does purchase the house 100 percent of their thought fee and rental credits are deducted in the pre-determined cost of the house.